Canyon's former London head to launch credit fund - sources

LONDON Thu Nov 8, 2012 9:59am EST

LONDON Nov 8 (Reuters) - Mans Larsson, the former head of the London office at Canyon Capital Advisors - one of the world's biggest hedge funds - is set to launch a credit-focused fund early next year, two sources familiar with his plans said.

Makuria Investment Management will trade credit instruments with a focus on European distressed debt and so-called special situations, and intends to launch in the first quarter of 2013, the sources, speaking on the condition of anonymity, said.

Europe's debt crisis has encouraged dozens of hedge funds to try and profit from trading corporate and bank bonds and loans beaten-down by volatile markets and the region's weak economies.

But so far this year there have been fewer big-name start-ups across the whole industry than in 2011 because the environment is tough for attracting cash from investors. Many managers who might have tried to launch new funds have tended to join existing firms instead.

Most of the new money coming into the industry has also flowed to the largest hedge funds as institutional investors - now hedge funds' biggest source of capital - prefer established firms.

Makuria is still in its early stages and is not yet registered with Britain's Financial Services Authority. But it has registered an office in London's Mayfair hedge fund heartland with Companies House.

London-based Makuria did not respond to requests for comment.

The fund will likely garner significant investor interest given Larsson's former employer.

Los Angeles-based Canyon Partners, founded by ex-Drexel Burnham Lambert traders Joshua Friedman and Mitchell Julis in 1990, is one of the world's largest hedge fund firms with more than $19 billion in assets under management.

The firm has its roots in distressed investing but also trades bank debt and high-yield securities as well as convertible and risk-arbitrage strategies.

Its flagship Value Realisation Fund earned almost 60 percent in 2009 after investing in loans and mortgage-backed securities hit hard by the financial crisis, and has racked up more than 10 percent annualised returns since it started, performance data seen by Reuters shows.

Before Canyon, Swedish national Larsson also spent time working at hedge fund Silver Point Capital and in the private equity business of U.S. investment bank Goldman Sachs.

According to the FSA register, he left Canyon in April.

Credit funds are up almost 10 percent this year against a 2.8 percent rise for the average fund, according to hedge fund tracking firm eVestment|HFN.

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